Speaker 1: This is Bloomberg Business Week. I'm Carol Masser and I'm
Speaker 1: Bloomberg Quick Takes Tim Stanovk. We're here every day bringing
Speaker 1: you the latest news from the world to business and finance,
Speaker 1: plus technology, politics, economics, all partnising the power of Business
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Speaker 1: can also listen to our radio show at two pm
Speaker 1: Eastern Time on Bloomberg Radio or watch us on YouTube
Speaker 1: search Bloomberg Global News. So we mentioned some of the
Speaker 1: COVID headlines, and our news team has certainly been covering them.
Speaker 1: And among the COVID headlines also new coronavirus cases in
Speaker 1: the U s surging to the highest weekly level since
Speaker 1: early February, fueled by that highly transmissible delta variant. Charlie
Speaker 1: was just talking about it, death rows By. That's the
Speaker 1: biggest weekly increase in December. And China is punishing dozens
Speaker 1: of local officials for failing to curb that COVID nineteen
Speaker 1: outbreak in that country, and so the country's former health
Speaker 1: chief they're saying the idea of quote living with the
Speaker 1: virus is unacceptable. We've got a great voice to bring in.
Speaker 1: He is back with us, Dr Jacob B. Kraft. He's
Speaker 1: a biologist. He is CEO and co founder of the
Speaker 1: privately held biopharmaceutical company Strand Therapeutics. He joins us on
Speaker 1: the phone from Boston, Massachusetts. Dr b. Craft, good to
Speaker 1: have you back here on Bloomberg Radio. How are you.
Speaker 1: I'm fantastic, Carol. How are you doing? Doing well? Doing well?
Speaker 1: Trying to manage through and filter through some of the
Speaker 1: headlines the current round of virus headlines cases surging, especially
Speaker 1: for those not vaccinated. What needs to be top of
Speaker 1: mind for our audience and the general public in your view,
Speaker 1: I think two things. One is, domestically, we need to
Speaker 1: make sure that we're getting vaccines out as quickly as
Speaker 1: we as we possibly can. I think see I think now. Finally,
Speaker 1: the BIDO administration is also taking the correct stuff, pressuring
Speaker 1: the FDA to prioritize the you know, the full review
Speaker 1: UH and approval of the COVID vaccine um. And internationally,
Speaker 1: we need to be getting vaccines out to the developing nations.
Speaker 1: The Delta variant was first picked up in India during
Speaker 1: their UH during their major outbreak recently um or months ago,
Speaker 1: and that likely lead to a huge international spread of it,
Speaker 1: which is now threatening you know, kind of the return
Speaker 1: to normal say that we saw right now. The Welcome
Speaker 1: Trust is reporting that one in two people in wealthy
Speaker 1: nations is vaccinated, but only one in seventy four are
Speaker 1: vaccinated in the developing world, and in the developing world,
Speaker 1: where sanitation is often you know, not as as well,
Speaker 1: and people are living in much tighter quarters in a
Speaker 1: lot of these areas, major cities in places like India.
Speaker 1: It further increases our our risk of spread. And so
Speaker 1: it's just unacceptable that we still haven't been able to
Speaker 1: get the vaccines out into these UH developing areas because
Speaker 1: every single day that goes by, we risk vaccine fully
Speaker 1: vaccine sort of resisted virus emerging either here or abroad.
Speaker 1: How tricky do you think it become, especially as people
Speaker 1: start to talk about, including Dr FACCI, about giving out
Speaker 1: boosters already, and how do we balance the developing world
Speaker 1: where some of them haven't even gotten their first vaccine
Speaker 1: individuals there and now we're talking about boosters potentially for
Speaker 1: those in the developed world. Right now, we have a
Speaker 1: bigger problem than than just the boosters. We have a
Speaker 1: problem of not enough people getting vaccinated in the United States,
Speaker 1: with which, honestly, while I respect everyone's right to choose themselves,
Speaker 1: when you live in a society, there is a certain
Speaker 1: amount of of of societal duty and and let's face it,
Speaker 1: patriotism that you should have to protect those Americans around you.
Speaker 1: This outbreak of the new variant is due to uh
Speaker 1: super spreader events happening, mostly driven by the unvaccinated population.
Speaker 1: Of course, now we're seeing them jump into the vaccinated
Speaker 1: population and it's it's it's very sad to see. But meanwhile,
Speaker 1: I think it was the state of Alabama. I saw
Speaker 1: recently how seventy four thousand vaccines expire while they help
Speaker 1: them as people did not take them. And so the
Speaker 1: idea here, and it's been the entire time that we
Speaker 1: have enough vaccines here state side, we should probably be
Speaker 1: doing more to get vaccines out to the developing world
Speaker 1: before they expire as well, um and continuing to just
Speaker 1: incentivize the massive manufacturing of these vaccines. I think that
Speaker 1: at this point, um, it's more of a logistical and
Speaker 1: a prioritization issue of getting vaccines where the most needed
Speaker 1: than it is of just not simply having enough. I mean,
Speaker 1: if you're going to say there's not enough for the
Speaker 1: developing world, but then Alabama's gonna less seventy four thousand
Speaker 1: vaccines expire in a freezer, I think that that's also unacceptable.
Speaker 1: It feels like a crime. Many would argue, what are
Speaker 1: you doing for your own employees. There's increasingly we're seeing
Speaker 1: employee employers another institutions saying if you want to work
Speaker 1: with us, you've got to be vaccinated. UM. You know,
Speaker 1: we we looked at and talked with a lot of
Speaker 1: other executives in the industry about this. I think we're
Speaker 1: very less both as a five set company and as
Speaker 1: a messenger RNA company to have, uh, you know, without
Speaker 1: any prompting from US, a hundred percent vaccine adherents. UM.
Speaker 1: Just you know. I think that people when they are
Speaker 1: educated about the science and understand how how safe and
Speaker 1: effective and impactful these vaccines are. UM, it wasn't something
Speaker 1: that really came up as a as a general issue. UM.
Speaker 1: I think that it's nice actually to see that some
Speaker 1: of the larger players of Southern Military recently UM saying
Speaker 1: that they're going to be starting to mandate the vaccines.
Speaker 1: I mean, I think that a lot of these employers
Speaker 1: should should you really incent to buy their employees to
Speaker 1: get these vaccines, especially people that work at tech and
Speaker 1: biotech companies. It's you know, it's clearly what's going to
Speaker 1: save us from from a vaccine resistant mutation. And while
Speaker 1: I think m R and A is a is an
Speaker 1: absolutely miracle of a of a platform in terms of
Speaker 1: how quickly it could be repurpose. Sefon den Cell and
Speaker 1: Ugo Sawhan from Maderna and Violent Tech of talk at
Speaker 1: length about making new vaccines against the new variants to
Speaker 1: be more effective against new sort of mutations that may arise.
Speaker 1: But sect of the matter is we have an effected
Speaker 1: vaccine that we just need to get into people's arms immediately,
Speaker 1: and it should be on employers. Really, I'd like to
Speaker 1: see the US government really step up and start to
Speaker 1: mandate if if people really want to return to a
Speaker 1: masthless life, we have to have a way to actually
Speaker 1: verify that people have in bad dr B Kraft, we
Speaker 1: talked about the US backing uh waiving patents on COVID vaccines.
Speaker 1: You know, a lot of researchers thought that was terrific
Speaker 1: that they thought that that was a good thing. A
Speaker 1: lot of drug makers didn't think. So what's your perspective
Speaker 1: on this and what does it mean in terms of
Speaker 1: drug development creating new vaccines for the next mutation? Uh
Speaker 1: and so on. I just don't think it's fundamentally helpful. Um.
Speaker 1: And I think I used this analogy before, maybe even
Speaker 1: last time I was on here. But these therapy its
Speaker 1: at so new, they're so cutting edge that a lot
Speaker 1: of the innovation that's there's actually in in the manufacturing tide.
Speaker 1: And so you can waive Madernast patents, but you won't
Speaker 1: be able to access all of their interior secrets to
Speaker 1: how they make those vaccines and and the the the
Speaker 1: actual sort of even reading through the patents that I
Speaker 1: think the best analogy that I that I had come
Speaker 1: up with was, you know, if you had Gordon Ramsay's
Speaker 1: ingredients in front of you and his recipe in front
Speaker 1: of you, could you cook like him? And the answer
Speaker 1: is of course no, right, And that's kind of what
Speaker 1: we're looking at here. It's so I just don't believe
Speaker 1: it's helpful, and I felt like in the Binding administration
Speaker 1: did that, UM, and they washed the hands of this
Speaker 1: vaccine issue and said, well, we've done all the help
Speaker 1: we can and walked away. And we're still sitting with
Speaker 1: one out of seventy four people in developing countries with vaccines.
Speaker 1: And I think that's just an absolute shame. To the
Speaker 1: point is by not just you're saying that even if
Speaker 1: we just opened this up, it doesn't mean all of
Speaker 1: a sudden we'd be able to produce tons and tons
Speaker 1: of vaccines easily and readily, so that we could vacciny
Speaker 1: basically everybody very much more quickly. They waived those patents
Speaker 1: three months ago, four months ago, and please point me
Speaker 1: to the to the example of what country then spun
Speaker 1: up their manufacturing and magically had COVID vaccine is ready
Speaker 1: to go. It was just the the obvious thing, of course,
Speaker 1: would have been to go back to year and start
Speaker 1: investing in the infrastructure of these vaccines and we can
Speaker 1: start making those infrastructure investments. We're seeing people like Anthony
Speaker 1: Faucine now UM, echoing some statements that I've made before,
Speaker 1: which is we need to double down on both manufacturing
Speaker 1: infrastructure of these next generation therapeutics, and we need to
Speaker 1: start thinking about how are we better prepared for pandemics
Speaker 1: in general. But further than that, I think that we
Speaker 1: just need better manufacturing infrastructure. We should have. It's true
Speaker 1: we should have made that that those investments a year
Speaker 1: ago when it looked like the Almannay vaccines were going
Speaker 1: to be a promising way out of this, we didn't
Speaker 1: make those investments. And so now now that I just
Speaker 1: feel like the administration seemed to want to waive the
Speaker 1: patents as if that was going to fix the problem.
Speaker 1: It didn't take the problem, and then here we are,
Speaker 1: um with without the problem being fixed. I'm not worried
Speaker 1: about the patents as a drug company or and I
Speaker 1: don't think Stefan dem cell or talking or worried about
Speaker 1: it either, but it's just fundamentally not helpful. Well, so
Speaker 1: we've gone through a lot, to say, understatement of the
Speaker 1: year of the decade, UH, in terms of the last
Speaker 1: year and a half, are we you know, you understand
Speaker 1: this world. You're on the cutting edge in terms of
Speaker 1: looking at new science and developing UH new methodologies, if
Speaker 1: you will. So have we learned anything in terms of
Speaker 1: being ready for the next pandemic in your view, I
Speaker 1: think that we had the technology right the m R
Speaker 1: and A technology was already being progressed by by the
Speaker 1: n I H by turning actually by all the people
Speaker 1: who are there. What we really needed was public and
Speaker 1: legislative support to invest in these things, to understand that
Speaker 1: these were issues. Right the people at the d D,
Speaker 1: people at DARK, people at the CDC, everyone has been
Speaker 1: screaming about the fact that we are at risk for
Speaker 1: a new pandemic for decades. I've heard it my entire
Speaker 1: professional life, almost to where you stop thinking about it
Speaker 1: even as a professional in the space. And now I
Speaker 1: think where we're sitting at is we have a very
Speaker 1: full public understanding of what a pandemic looks like in
Speaker 1: a modern age that nineteen twenty, but in a day
Speaker 1: where you can you can be in Wuhan, China one day,
Speaker 1: step on a plane, and fourteen hours later be walking
Speaker 1: out in to the middle of New York City, and
Speaker 1: that is a can be a very scary place for
Speaker 1: the propensitive of a pandemic. So I think now we
Speaker 1: have the understanding of the economic and personal toll that
Speaker 1: these sorts of things can take. And I hope I
Speaker 1: really do hope that it means that we can get
Speaker 1: the public and the legislative support to actually make real,
Speaker 1: bold investments into the future of defense. I'm gonna leave
Speaker 1: it on that note. Thank you so much. I always
Speaker 1: appreciate when you join us and find some time for us.
Speaker 1: Dr Jake Becraft he is the co founder and chief
Speaker 1: executive officer of Strength Therapeutics, joining us on the phone
Speaker 1: from Boston. Well online at Bloomberg business Week dot Com.
Speaker 1: A story on a topic that may make your make
Speaker 1: you roll your eyes a little bit or possibly glaze over,
Speaker 1: But it's something that always seems to indicate another crisis
Speaker 1: moment in Washington, until it doesn't, and then until it
Speaker 1: rears its ugly head again. It's about the debt ceiling.
Speaker 1: So let's get more from Bloomberg News Head of US
Speaker 1: Rates and f X Benjamin Purvis. He is here in
Speaker 1: our interactive broker studio in New York City along with
Speaker 1: Bloomberg Business Week editor Joe Weber on the remote access
Speaker 1: in Massachusetts. Is it fair to say, like your eyes
Speaker 1: glaze over, or you shake your head, you roll your head,
Speaker 1: You're like, okay, it's a story that's going to pass
Speaker 1: and then all of a sudden it shows up again,
Speaker 1: Joel uh and I was like, wait, what, it's back?
Speaker 1: And of course it is, um And it's been a
Speaker 1: little bit since we we've had to play this game
Speaker 1: of chicken, but it is, it is back, and you
Speaker 1: know it will have repercussions and been our How are
Speaker 1: those starting to already show up? What? What has investors
Speaker 1: and traders um freaking out? I I think you know,
Speaker 1: investors are sick of this thing, to be honest, I
Speaker 1: mean you know, I think you make the point that
Speaker 1: you know it comes up got your eyes glaze over.
Speaker 1: But it is important. Is at once ridiculous and and
Speaker 1: u afterally important. Um, it's ridiculous in the sense that
Speaker 1: you know, these folks are voting on increasing a limit
Speaker 1: for debt that they've already you know, increased the spending
Speaker 1: bills for so they've already approved the spending. Yet now
Speaker 1: we have to go out and improve the debt to
Speaker 1: to to finance it. But at the same time, you know,
Speaker 1: this is having real world impacts, and this is part
Speaker 1: of what we were we've been writing about recently, is
Speaker 1: the real world impacts on on borrowing costs, The real
Speaker 1: world impacts on distorting things just because of some of
Speaker 1: the ins and outs and the arcane rules surrounding it.
Speaker 1: So what is this thing we call debt ceiling because
Speaker 1: we throw it around and assume everybody knows what we're
Speaker 1: talking about, But I mean, what is it really? I mean, essentially,
Speaker 1: it's the it's the amount the credit card limit, if
Speaker 1: you will, of the US government, And you know, the
Speaker 1: Congress sets what it allows the government to borrow and
Speaker 1: then periodically has to raise that limit because America's debt
Speaker 1: pile is is not getting any smaller. It's you know,
Speaker 1: ballooned and ballooned even more in this sort of post
Speaker 1: COVID crisis to around twenty eight trillion, So you know,
Speaker 1: this isn't getting any smaller. And the spending bills that
Speaker 1: allow this, that that require this spending, this borrowing, you know,
Speaker 1: they've already been passed. This has already happened. So it's
Speaker 1: literally just saying I'm going to agree to pay off
Speaker 1: the credit card bill for all this stuff that I
Speaker 1: bought from Macy's or whatever. Um. And I could get
Speaker 1: a lot of stuff at Macy's, could buy Macs, you
Speaker 1: probably could a few times over. But I mean, you know,
Speaker 1: as part of all of this, you know, we end
Speaker 1: up with a partisan wrangle each time, and it's something
Speaker 1: that happens under administrations of both parties. You know, it
Speaker 1: happened under Barack Obama, it happened under Donald Trump, It's
Speaker 1: happening again under Joe Biden. And one party holds the
Speaker 1: other too, you know, to account. They like to describe it,
Speaker 1: but it's really just holding them hostage to what is fundamentally,
Speaker 1: you know, a superfluous thing because we know they're going
Speaker 1: to find the money. Correct, Is that a stupid assumption?
Speaker 1: Or know everyone everyone bet you know, everyone is essentially
Speaker 1: betting on the fact that you know, somehow or another,
Speaker 1: you know, they'll come up with a with a fix
Speaker 1: on it. And and that's one of the other ludicrous
Speaker 1: elements of this is that, you know, the debt limit
Speaker 1: is now back in place. It came back in place
Speaker 1: at the beginning of this month. Yet America is continuing
Speaker 1: to borrow because they've got so called extraordinary measures, which
Speaker 1: allows them to wangle a few things here to a
Speaker 1: few nips and tucks there, do a few accounting maneuvers
Speaker 1: somewhere else. And all of this has an impact. Um.
Speaker 1: You know, it's sort of underscores how ludicrous it is. Um. On.
Speaker 1: One element that really underscores that we we we talk
Speaker 1: about is this idea that you know, as part of
Speaker 1: the whole mechanics of it, they have to get the
Speaker 1: pile of cash that America has down. Um. The essential
Speaker 1: reason being this is to stop them going out and say,
Speaker 1: issuing five trillion dollars worth of debt just before the
Speaker 1: ceiling comes into place, and then just using that to
Speaker 1: pay their bills at their leisure without having to do it.
Speaker 1: This time around, everyone was talking about, oh, we have
Speaker 1: to get the cash pile down. We have to get
Speaker 1: it down to about a hundred and thirty billion dollars,
Speaker 1: which isn't chicken feed, but is not a huge amount
Speaker 1: in the grand scheme of things for Uncle Sam and
Speaker 1: then lo and behold. At some point in that process
Speaker 1: the Treasury says, actually that ms alright, for those of
Speaker 1: you whose eyes are glazing over, stay with us, right chel.
Speaker 1: Not only that, because I think this is the other
Speaker 1: element that comes into play here is that there's an anniversary.
Speaker 1: This is ten years ago that the US actually uh
Speaker 1: you know, went through this whole song and dance and
Speaker 1: snpeak with a decision that stripped the US of its
Speaker 1: triple A creator credit rating, which been would have been
Speaker 1: the repercussions of that decision ever since and what kind
Speaker 1: of bearing might that have on on the conversations this
Speaker 1: time around? Well, I mean the cynics would say that,
Speaker 1: you know, America has only gone from you know, strength
Speaker 1: to strength in terms of what it can borrow and
Speaker 1: how it's being able to borrow since then. The debt
Speaker 1: pile is you know, exploded since then. Interest rates have
Speaker 1: actually been lower since then, So in real world terms,
Speaker 1: it hasn't affected the ability of the borrower to borrow.
Speaker 1: But you know, it did cause some major eructions within markets.
Speaker 1: It caused some major troubles and and you know it
Speaker 1: under underscores how fragile, you know, some of these things are,
Speaker 1: and that this isn't really a plaything that that Washington
Speaker 1: folks should be you know, messing around with for partisan politics.
Speaker 1: Because you're write about that to get the cash balanced down, correct,
Speaker 1: that the Treasury does affect markets because it's not borrowing
Speaker 1: as many t bells. So this you know, supplied tom
Speaker 1: Right things happen. Yeah, I mean, it's it's you know,
Speaker 1: it's one of it's the biggest, baddest debt market on
Speaker 1: the planet. It you know, dictates the cost of every
Speaker 1: you know, of everything that sort of people overlay over it.
Speaker 1: And you know, even minor changes that affect the interest
Speaker 1: rates on say you're a three month bill or a
Speaker 1: six month bill can have repercussions down the line. And
Speaker 1: you know, the Treasury deciding to issue half as much
Speaker 1: as it did that will have a major impact on
Speaker 1: the costs. So when we think about how this could
Speaker 1: come to ahead, what are you going to be watching, Ben, Well, Unfortunately,
Speaker 1: it's that good old waiting game of of looking at
Speaker 1: what Mitch mcconnald's doing, what Chuck Schumer's doing, and all
Speaker 1: the all the usual suspects in Washington. Um. You know,
Speaker 1: we've just seen today, um the latest in the wrangling
Speaker 1: over over this UM topic. And obviously it's it's being
Speaker 1: interspersed with wrangling over other spending type priorities, over the
Speaker 1: infrastructure bill we've got in Washington, over the broader spending
Speaker 1: agenda the Biden administrations looking to pursue, and these are
Speaker 1: all being counterbalanced as part of some you know, we
Speaker 1: would like to say it's some big chess game, but
Speaker 1: maybe it's not so so well thought out. I love
Speaker 1: how you end that. It's not to say that debt
Speaker 1: and deaf as it's don't matter. But the way the
Speaker 1: u S thinks and legislates on the topic needs to change.
Speaker 1: And I think most of us have been following this,
Speaker 1: or like you, who have been watching this over and
Speaker 1: over again, things need to change. Say all right, Benjamin,
Speaker 1: purpose thank you so much. It's an important story to
Speaker 1: understand what keeps coming round and round when it comes
Speaker 1: to government negotiations on spending and how to pay for it.
Speaker 1: Benjamin of course, Benna's head of US Rates and f
Speaker 1: X at Bloomberg News, and of course Joe Weber, our
Speaker 1: editor of Bloomberg Business Week, fun at online at Bloomberg
Speaker 1: dot com. This is Bloomberg Business Week with Carol Masser
Speaker 1: and Bloomberg Quick Takes Tim Stinovik on Bloomberg Radio. You
Speaker 1: are on a seed to Bloomberg Business Sweek on Bloomberg
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Speaker 1: brought to by s c I. Today's competitive marketplace requires
Speaker 1: asset managers to become more operationally a deep see how
Speaker 1: you can transform your business with SEIS Global Platform at
Speaker 1: se i C dot com slash. I m s, Well,
Speaker 1: it's been chronic the flow of headlines out of China,
Speaker 1: in particular crackdowns on the country's big tech companies and more.
Speaker 1: But what's really going on here? Well, let's find out,
Speaker 1: and he writes about it in his weekly column Bloomberg
Speaker 1: New Economy Editorial Director Andy Brown. He notes that there
Speaker 1: is something much bigger going on. He joins us in
Speaker 1: our Bloomberg Interactive Broker studio. So you and I've talked
Speaker 1: a lot about the headlines, and I feel like they
Speaker 1: are fast and furious, NonStop, um, very thoughtful column. And
Speaker 1: you look at it in a different way. What's what
Speaker 1: do you see is really going on here? So the
Speaker 1: question everybody wants the answer to is why on arth
Speaker 1: a Chinese authorities going after the most dynamic, the most
Speaker 1: profitable part of their comm me, which of course is
Speaker 1: the tech sector and particularly consumer tech at a crackdown
Speaker 1: by the way that has cost listed Chinese companies in
Speaker 1: excess of one trillion dollars. And I happen to think
Speaker 1: that the most popular explanation for this is also the
Speaker 1: most unlikely. And the explanation everybody is coming up with
Speaker 1: is this is this is sort of benign. This is
Speaker 1: President Shi jim paying looking at rising prices in China
Speaker 1: and saying this is exacerbating inequality and we have to
Speaker 1: do something about it, and that will that involves cracking
Speaker 1: down on tech companies who are allegedly building monopolies and
Speaker 1: underpaying their gig workers and abusing consumer data and so on.
Speaker 1: And so I haven't to think this is a fig
Speaker 1: leaf that actually this is all about a monumental struggle
Speaker 1: for power and control in China. And the giveaway, the
Speaker 1: giveaway here is the fact that the sharp end of
Speaker 1: this crackdown and you're seeing it now, particularly last week,
Speaker 1: is led by ideologues in the party and including in
Speaker 1: the propaganda agencies, which really are core to power in China. Well, right,
Speaker 1: and that I mean if you think about impacting people
Speaker 1: right in terms of how they're thinking about it. So
Speaker 1: so you're basically saying, Andy, the Chinese government's all that
Speaker 1: worried about losing its power of controlling its people. Is
Speaker 1: that it I think they look it's not it's certainly
Speaker 1: not the full story, but it's a much more likely
Speaker 1: explanation than going after tech moguls because that's their pathway
Speaker 1: for reducing inequality. If that really was what they had
Speaker 1: in mind, they would be doing something about public policy,
Speaker 1: because it's public policy that shapes education, shapes healthcare, um
Speaker 1: you know, shapes shapes housing markets, which are the three
Speaker 1: biggest drivers of inequality in China today. Right. And what's
Speaker 1: interesting is you talk about I mean, the government controls
Speaker 1: so many of these different markets right already. So it's like,
Speaker 1: well white right, well, so you take so they closed
Speaker 1: down the entire hundred billion dollar tech sector, right, Okay,
Speaker 1: then you ask yourself why is how how did this
Speaker 1: sector come into being? Well, you know, it's a market
Speaker 1: response to a brutally, brutally competitive education system, which, by
Speaker 1: the way, in rural areas of China is chronically underfunded.
Speaker 1: Parents will pay anything to get their kids through examinations,
Speaker 1: particularly the gal call examination that gets you into good
Speaker 1: colleges and is the it is the pathway to social
Speaker 1: mobility in China. That's why you haven't it now. If
Speaker 1: you want to fix your your your problem, you do
Speaker 1: something about the structure of education. And it's a similar
Speaker 1: story in healthcare. The same story in housing, because if
Speaker 1: you control it or shut it down, it just becomes
Speaker 1: even more accessible, right right, Well that's the crazy thing.
Speaker 1: Now Now, if if you're not going to be very
Speaker 1: expensive to go online, uh, you're basically forcing forcing poorer family,
Speaker 1: middle class families to do except one on one home tutoring.
Speaker 1: And do we have these conversations often with you and
Speaker 1: just generally because it's been impacting also financial markets. I mean,
Speaker 1: where does it go? How do you see it playing out?
Speaker 1: You understand obviously having spent time there, kind of how
Speaker 1: they think and how they approach things. So where does
Speaker 1: this go? How do you think this ultimately plays out?
Speaker 1: I think this this, this is by no means the
Speaker 1: end of the story. I think we're at the beginning
Speaker 1: of an almighty struggle, uh for for power and control
Speaker 1: in China. And this this is Ji Jimping and the
Speaker 1: Party saying, you know, we've identified the one part the
Speaker 1: the the one class of people in China that can
Speaker 1: rival us the Party in influence. They have the wealth,
Speaker 1: they have the social standing, and they have the strategic
Speaker 1: resources big data. And the Party is saying, we want that,
Speaker 1: we want to clawback control and power. What could big tech. Ultimately,
Speaker 1: if they have their way and they're able to kind
Speaker 1: of keep running with it, how could that really change
Speaker 1: the power structure. I mean, I understand how it can
Speaker 1: influence thought right, but I mean in terms of actually
Speaker 1: changing the Chinese government, could it? No? You not, No,
Speaker 1: I mean nobody, nobody is talking about overthrowing but people.
Speaker 1: But the question, and you know from from Si Ching
Speaker 1: Pings point of view, is we're about to go into
Speaker 1: we are in approach where now in a period of
Speaker 1: extreme competition with the United States, Essentially they've decided that
Speaker 1: the US wants to contain China wants rise, wants to
Speaker 1: take it down. They want the data, they need power,
Speaker 1: they need to consolidate their control. Uh, they want to
Speaker 1: have a top down economy. They believe actually the big
Speaker 1: data will be able to guide a high tech authoritarian
Speaker 1: regime and it will be much much more successful than
Speaker 1: the US model. So for I know, I always bring
Speaker 1: it back to you for this because and forgive my
Speaker 1: ignorance in terms of kind of understanding, but I do
Speaker 1: think about investors because I don't feel like I know
Speaker 1: Kathy would and ARC they've kind of pulled back a
Speaker 1: little bit, but not every investor has just got about
Speaker 1: thirty seconds left here. Do investors need to be increasingly nervous?
Speaker 1: They do need to be increasingly nervous because because there
Speaker 1: is no way of divining where this thing is going
Speaker 1: to play out once it enters the period, once it
Speaker 1: enters the realm of ideology and politics, there is no
Speaker 1: model that can predict where this is going, no matter
Speaker 1: what Chinese regulators say, all right, going to leave it
Speaker 1: on that. I know you sent us a lot more stories,
Speaker 1: so we'll have to get to them next time. So
Speaker 1: I apologize, but I love I'm glad that we were
Speaker 1: able to dig into this. Andy, thank you appreciate it.
Speaker 1: Andy Brown, He's editorial director at Blomberg New Economy. In
Speaker 1: our interactive broker studio, this is the big Day, the
Speaker 1: best of Bloomberg's in depth original reporting from around the globe.
Speaker 1: What we actually make sure we do, as the economy
Speaker 1: covers is look at the data kind of broken down
Speaker 1: a bit. It's fun to becoming more and more expensively
Speaker 1: to be looking at the shifting billion dollars for the
Speaker 1: red entry level. There's been ways of immigration that have
Speaker 1: faced a lot of resistance, a lot of color behind
Speaker 1: the scenes in a great untold story. How did Bezos
Speaker 1: really come out on top? As the cover says, Jeff wins,
Speaker 1: he always seems to win the big take on Bloomberg Radio.
Speaker 1: All right, well, the Bloomberg Big Take happens to be
Speaker 1: also the most read story on the Bloomberg today. It's
Speaker 1: about the little known hedge fund and it's manager that
Speaker 1: blew up to the tune of twenty billion, making both
Speaker 1: the fun and the individual behind it household names just
Speaker 1: a few months ago. Let's get more on this story,
Speaker 1: Bloomberg hedge fund reporter Kathy Burton. She's with us in
Speaker 1: our Interactor Broker studio in New York. There was a
Speaker 1: period where like every day, this is what we talked about.
Speaker 1: We're talking about our keegos, right, so remind our audience
Speaker 1: in case they forgot, because it really was this individual
Speaker 1: and fund that we never talked about. Really well, yes,
Speaker 1: the thing is that's it's actually a family office um
Speaker 1: for a guy named Bill Huong who used to be
Speaker 1: a hedge fund manager. He got into a little bit
Speaker 1: of legal issues with the SEC and then he turned
Speaker 1: into a family office of several years ago. That's right,
Speaker 1: I forgot he went through a couple of iterations, so
Speaker 1: remind us though that, you know, then it blew up
Speaker 1: right to the tune of twenty billion dollars spectacularly. Yes,
Speaker 1: no one realized that he had amassed an amazing fortune
Speaker 1: of more than twenty billion dollars. And then in two
Speaker 1: days it disappeared. And we're still trying to You and
Speaker 1: I were talking before we got going. There's still so
Speaker 1: many questions out there about kind of what happened. Yes, exactly,
Speaker 1: there was a big report that came out from Credit
Speaker 1: Suite several days ago, and in that report they said
Speaker 1: that our kid goes the family office likely lied about
Speaker 1: to the bank, but they provided no other details of
Speaker 1: exactly what that means. And they did say that they
Speaker 1: were going to go after Urchgos to try and get
Speaker 1: some money back. Well, and to be fair, there are
Speaker 1: obviously a lot of litigation going on at this point,
Speaker 1: uh yet, but we expect that yes, there will be.
Speaker 1: I mean, what's interesting, listen, Kathy, you follow Wall Street,
Speaker 1: the financial community, the hedge fund industry. I mean, we
Speaker 1: want to kind of know what happened, right, because this
Speaker 1: is one of those stories that we think there's a
Speaker 1: fair amount of transparency right in the financial markets, and
Speaker 1: all of a sudden, something like this blows up and
Speaker 1: you're reminded that, wait a minute, something can happen to
Speaker 1: the tune of twenty billion dollars kind of from nowhere. Yes,
Speaker 1: And in that Credit Swiss report which people can see, um,
Speaker 1: there are many examples of in which the bank actually said,
Speaker 1: our kids sort of told us that they had similar
Speaker 1: positions at other banks. Uh, And then it's really hard
Speaker 1: to imagine that they were allowed to build up a
Speaker 1: portfolio that was worth about a hundred and twenty billion
Speaker 1: dollars including leverage, which is pretty remarkable. Okay, So and
Speaker 1: transparency maybe would have helped prevent that from all from happening.
Speaker 1: What's great about this story is, as I said to you,
Speaker 1: you know, there was a period where we were talking
Speaker 1: about this constantly as as it unwound in the financial markets,
Speaker 1: and just kind of getting a grasp of who this
Speaker 1: individual was. Um, he's still around. He's still around, he said,
Speaker 1: Um in New Jersey, that's where he lives right and
Speaker 1: before and where he lived before, and he's uh, just
Speaker 1: trying to work through this big fiasco that's happened to
Speaker 1: him and there's a SEC is looking into it, the
Speaker 1: d o J is looking into it. He has employees
Speaker 1: who are angry at him because they lost all their
Speaker 1: deferred comp when the firm blew up. And he has
Speaker 1: some employees that are hopening to start their own hedge funds,
Speaker 1: and is he supportive of that? As far as we
Speaker 1: can tell, he is, although we don't know if that
Speaker 1: support extends to giving them money or not. And that's
Speaker 1: I guess one of the questions. As you said, there's
Speaker 1: still a lot of questions out there. I mean, he um,
Speaker 1: you know, lives in an expensive place in New Jersey, right,
Speaker 1: I mean he's not somebody though that was really flashy. Right. No? Not.
Speaker 1: I mean the house is nice, but it's not Steve
Speaker 1: Cohen nice or Ray Dalio nice. It's it's just a
Speaker 1: nice house, right exactly. And and we don't still know
Speaker 1: what money he's got left right personally. No, his employees
Speaker 1: speculate that he is still a billionaire. But because um,
Speaker 1: we're told that he has investments outside of our caghos.
Speaker 1: He was, for example, an early investor in Cathy Woods
Speaker 1: um et F, although we don't know if he still
Speaker 1: has that or not. We also know that and a
Speaker 1: final week, he took about two billion dollars an excess
Speaker 1: margin from Credit Sweez, But we don't know what happened
Speaker 1: to that money. We don't know if if he put
Speaker 1: it someplace out or if he used it to pay
Speaker 1: off margin calls from other banks. We don't know. Um,
Speaker 1: just got about forty five seconds left here, Kathy, UM,
Speaker 1: and I do highly recommend, as I said, it's a
Speaker 1: most read store, the most read on the Bloomberg in
Speaker 1: doing this and kind of doing this update update on
Speaker 1: kind of you know where he is, how he's doing.
Speaker 1: What's your big takeaway right now on either him and
Speaker 1: just kind of where this story sits right now. Uh,
Speaker 1: mostly that there's just a lot more to come. We'll
Speaker 1: probably see some sort of suit or something from Credit
Speaker 1: Sweee and which we'll be able to get more information
Speaker 1: maybe from the other banks too, we don't know. Uh.
Speaker 1: And it's it's just really an ongoing tail and it's
Speaker 1: going to be interesting to see where if he's still
Speaker 1: tries to come out and have a new family office
Speaker 1: for exact right right, I mean we've seen people right
Speaker 1: doesn'min come back. UM, And it's just a reminder that
Speaker 1: this is evolving and more to come out. It's a
Speaker 1: must read. I'll put it out on Twitter. There's so
Speaker 1: much great detail in it. Kathy, thank you so much.
Speaker 1: I really appreciate it. Kathy Burton, hedge fund reporter at
Speaker 1: Bloomberg News in our Interactive Broker studio. As I said,
Speaker 1: it is the Bloomberg Big take on this Monday, I'm
Speaker 1: broc journal now. But you let me drive. Oh no,
Speaker 1: no, no no, no home honey, please, I'll do the righting
Speaker 1: ravel Let me. I want to drive, Just drive, baby,
Speaker 1: it's the questions trying. This is the drive to the
Speaker 1: globe commune. Thanks, we'll try us. Dawn on Bloomberg Radio.
Speaker 1: All right, just about ten and a half minutes left
Speaker 1: in today's trading day. It is time for the drive
Speaker 1: to the close back with us. It's got QB's chief
Speaker 1: investment officer, Carson Group. He is with us on the
Speaker 1: phone from Omaha, Nebraska. He's got good to have you
Speaker 1: back here on Bloomberg. How are you great? And thanks
Speaker 1: for having me back. Carroll. What's good to have you here.
Speaker 1: How do you see the market environment right now? You
Speaker 1: know we're seeing this as a market that's obviously rallied
Speaker 1: a lot. We've had some great earnings news that I
Speaker 1: think is pretty much fully reflected in market prices. Uh
Speaker 1: And and so from that standpoint, I don't think we're
Speaker 1: expecting super large, exorbitant games from this point forward. But
Speaker 1: at the same time, I don't see that there's a
Speaker 1: lot of pressure against the market sending it lower with
Speaker 1: a couple I think major risk factors out there, UM,
Speaker 1: COVID and some other ones that we can dive into
Speaker 1: as well. But we always seem a market that's reflected.
Speaker 1: A lot of the good news is out there, and
Speaker 1: we don't really want to encourage people not to chase
Speaker 1: after markets that have already run from from some news
Speaker 1: is very much fully reflected in it all right, So
Speaker 1: a lot of good news out there reflected in the
Speaker 1: prices existing already in the financial markets, the equity markets.
Speaker 1: And yet you're not necessarily saying that we now deserve
Speaker 1: a pullback either. No. I think that the valuations are
Speaker 1: are in a reasonable stage, and we've also got a
Speaker 1: tremendous amount of momentum going in the market. One of
Speaker 1: the things I think we've learned from the corporate earnings
Speaker 1: news that came out this quarter, but actually, even going
Speaker 1: back to two periods about a year ago, when things
Speaker 1: were obviously uh during the greater degrees of lockdown and challenges,
Speaker 1: this Corporate America's ability to produce profits, it's really an
Speaker 1: amazing factor. It really starts to show one of those
Speaker 1: longer term reasons about why we take risk in our portfolios,
Speaker 1: why we invest in the markets, why capitalism works for people,
Speaker 1: It is because it generates returns and the people are
Speaker 1: managing the business is very well and whether it's smaller
Speaker 1: profits but more than expected during COVID or really large rebounds,
Speaker 1: what we've really seen is that being participating as an
Speaker 1: owner in Corporate America has been a great, great proposition
Speaker 1: for investors for really especially the lie this year and
Speaker 1: a half. All Right, So, having said that, are there
Speaker 1: particular parts of the market that you would prefer being
Speaker 1: in right now? Yeah? I think one of the areas
Speaker 1: that we continue to see some opportunities in the technology space,
Speaker 1: especially in the security spot. One of the areas that
Speaker 1: we risk, you know, from our macro perspectives, we look
Speaker 1: we look at a number of major risks that are
Speaker 1: out there, and one of them we've identified is these
Speaker 1: these attacks on companies um that are you know, where
Speaker 1: they're held hostage with their computer networks and those that
Speaker 1: sort of attack is something that hasn't hit us real hard.
Speaker 1: It's been more of a minor irritant, but we raped
Speaker 1: that as one of our top risks out there, and
Speaker 1: I think that one of the beneficiaries of that are
Speaker 1: going to be technology companies, especially those who provide security
Speaker 1: to corporations, especially those really vital to our system. And
Speaker 1: so that's one of those longer term trends at from
Speaker 1: a risk standpoint that we think people will rally to.
Speaker 1: And that's one of the areas that we're looking for
Speaker 1: for investments in is in the in in the technology
Speaker 1: security area, right. And if you think about it, companies
Speaker 1: increasingly they can't ignore it, right because their business is
Speaker 1: put at risk if they're not making sure that their
Speaker 1: business and certainly as things are much more online and digital, like,
Speaker 1: you've got to just make sure it's protected. UM. China
Speaker 1: something we just talked about with Andy Brown a little
Speaker 1: while ago of our Bloomberg New Economy about what's going
Speaker 1: on in China. How do you see it? What are
Speaker 1: the implications for investors as a result, You know, China
Speaker 1: has been another one of those risks that's been on
Speaker 1: our top five for really a while. We see a
Speaker 1: number of big trends that are negative, like the U
Speaker 1: S and China butting heads on a lot of different areas.
Speaker 1: Partly from the Chinese perspective, it feels like the US
Speaker 1: is shutting them out of the value added technology space
Speaker 1: just when their economy needs higher paying jobs because they
Speaker 1: don't have the same population growth as they used to
Speaker 1: in the shorter term, I think what we've really seen
Speaker 1: is that China is becoming much more negative in its
Speaker 1: efforts to try to control the capitalist tendencies that were
Speaker 1: so successful within the economy. That clearly is a very
Speaker 1: very bad sign for for investors, and that's been very
Speaker 1: much heavily reflected in prices. And I think there's also
Speaker 1: that we haven't seen much movement on trade or any
Speaker 1: other issues that have been rollbacks of some of the
Speaker 1: Trump policies have been a few minor adjustments, but basically,
Speaker 1: even though we had a change in administrations, I would
Speaker 1: said that that overall system from the US investor standpoint
Speaker 1: is probably more more concerning than it was before. And
Speaker 1: therefore that's one of the big risk points that we've identified.
Speaker 1: All right, that is interesting. What about the FED as
Speaker 1: a another risk, Yeah, I think that's definitely one that
Speaker 1: we see policy risk, partly on the fiscal side, but
Speaker 1: really with the FED side. And I think that people
Speaker 1: are overplaying the risk of FED to too much. To
Speaker 1: one side. There's the idea that to the negative, yeah,
Speaker 1: but there's also you know, in the sense that they
Speaker 1: could be too hawkish and they can also be too debblish.
Speaker 1: I think the FEDS had a fairly I think they
Speaker 1: had a great response initially in COVID. They've had a
Speaker 1: pretty easy run. I mean, what are they going to
Speaker 1: do next meeting? Pretty much the same thing they've been
Speaker 1: doing for a while, meeting after meeting after meeting, not
Speaker 1: going to do anything to shock the world, Right, Like,
Speaker 1: we know, if anything we've learned, we understand policy will change,
Speaker 1: But we also know that the FED isn't going to
Speaker 1: all of a sudden just go take a one eighty.
Speaker 1: That's just not how it happens. And I think one
Speaker 1: of the things that you raise there is a really
Speaker 1: good point. I think investors are still concerned about going
Speaker 1: back to periods where the FED had problems communicating well.
Speaker 1: I really think that the FED, the last few FED
Speaker 1: chairs have done a much better job of communicating what
Speaker 1: their intentions were the market. And so I see that
Speaker 1: sort of taper tantrum risk where the market gets surprised
Speaker 1: to be much lower, and I think JAF Powell and
Speaker 1: his team have done a great job of signaling what
Speaker 1: that is. And so that's the risk that we don't
Speaker 1: see as high, being that the Federal surprises. I don't
Speaker 1: think the Fed's got a big surprise built in their system.
Speaker 1: And that's one of the things that when we look
Speaker 1: at why we continue to invote, why we aren't so
Speaker 1: negative or is concerned as some people are, is this
Speaker 1: because we just don't see that risk as being particularly material.
Speaker 1: I think they're tougher. One is how soon do they
Speaker 1: start tapering and do they push it too hard? I
Speaker 1: think the last time when they tighten policy, I think
Speaker 1: an eight consecutive meetings and they rolled back some other
Speaker 1: policies in another one that we're loosers, so basically tighten
Speaker 1: monetary policy meeting after meeting after meeting. That was too fast,
Speaker 1: and I think that's the harder thing for the FED
Speaker 1: is to say, how do we do it, what paste
Speaker 1: do we do it so we don't get too far behind,
Speaker 1: But also in the Calas case that they got too
Speaker 1: far ahead and had to roll some of those backs
Speaker 1: even before the pandemic started, and really had a tighter
Speaker 1: moletary policy than the U S could really handle. Commodity
Speaker 1: move today significant in your view, um. I thought the
Speaker 1: gold move was interesting because it represented a deviation from
Speaker 1: where really you real yields are. It's it's it's tied
Speaker 1: very careously. I suspect that's a supply and demand something
Speaker 1: different by investor moves. I think that. I also think
Speaker 1: when I look at oil prices, my expectation is that
Speaker 1: there's some degree of supply that is out there that
Speaker 1: is available to move in. The producers in the US
Speaker 1: are trying to be more discipline, but in the end
Speaker 1: there's going to be more well drilled. I think the
Speaker 1: other respect is concern about how the delta storing might
Speaker 1: slow down demand in China more lockdowns essentially rolling through.
Speaker 1: And that's something important for us to investors to know,
Speaker 1: is is that we're not the biggest demander of most commodities.
Speaker 1: Most of the time, the Chinese are, and actions that
Speaker 1: they take can actually directly affect our markets pretty severely
Speaker 1: because of the prices. I think that's a good today,
Speaker 1: a good reminder of what we're seeing. My expectation as
Speaker 1: oil will drift down lower, partly from supply and partly
Speaker 1: from some of the demand on COVID until we start
Speaker 1: to see those next ways of booster shots come out.
Speaker 1: So you will see some tightening of policy as far
Speaker 1: as lockdowns, but but not a ton. Uh. Dave Wilson,
Speaker 1: or Bloomberg Stocks calumnist and editor, pointed out that when
Speaker 1: you take a look at the tenure yielded at one
Speaker 1: thirty two s and P dividend yield is at one
Speaker 1: point thirty two, what does that say to you? And
Speaker 1: just got about twenty five seconds here. Uh, that yield
Speaker 1: on the tenure is not offer a really good return
Speaker 1: compared to especially compared to where inflation patations are and
Speaker 1: where they're going. And so that's a tough space, but
Speaker 1: it's so good for risk reduction. But yeah, longer term bonds,
Speaker 1: we would expect to see yields drift up some overtime,
Speaker 1: but it is interesting to see them both right there
Speaker 1: smack on the same. Hey, Scott good to check in
Speaker 1: with you. Scott Kobe, he is senior investment strategist at
Speaker 1: the Carston Group, on the phone from Omaha, Nebraska. Thanks
Speaker 1: for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud,
Speaker 1: or Bloomberg dot com, and you can also listen to
Speaker 1: our radio show at two pm Eastern on Bloomberg Radio
Speaker 1: or watch us on YouTube search Bloomberg Global News